Small airline Allegiant Air flying under travel radar

by Dawn Gilbertson - Nov. 7, 2010 12:00 AMThe Arizona Republic

Cori Loyd lives up the street from Sky Harbor International Airport but drives miles past it, heading across the East Valley, through Chandler and Gilbert, to catch flights to her parents' house outside Chicago.

Allegiant's flight to Rockford, Ill., has become Loyd's wedding-planning shuttle. She has made two trips already this year, a third is coming up at Christmas, and there will be two more next spring. The non-stop flights into Rockford, which she discovered a year ago, are considerably cheaper than what she paid on US Airways to Chicago and land her much closer to her parents' house.

"I haven't really flown on anyone else since," Loyd said.

Allegiant has quietly developed a loyal following - and consistent, sizable profits - by zeroing in on travelers and routes competitors consider as an afterthought.

The Las Vegas-based airline serves 68 cities, a third of US Airways' destinations, and all but a handful are small: places like Cedar Rapids, Iowa; Bellingham, Wash.; and Sioux Falls and Rapid City, S.D. Allegiant offers non-stop flights on routes that traditionally required a change of planes and gets attention with fares as low as $19.99 each way.

"It's kind of like what Southwest has done for 40 years in big cities; we're doing it in small cities," Allegiant President Andrew Levy said.

The publicly traded airline, which was founded in 1997 and adopted its current strategy after bankruptcy reorganization in 2002, courts vacationers, not business travelers. It flies to most of its destinations just a couple of times a week, similar to a charter operator, and does it with 20-year-old MD-80 jetliners that it refurbishes.

Growing in Mesa

Allegiant's bread and butter is bringing travelers from little-served areas to popular vacation spots such as Las Vegas, Florida and, most recently, Arizona via Mesa.

Mesa has played a key role in Allegiant's growth. The airline started its Mesa service three years ago last month with flights to 13 cities and now is up to 27, with seven cities added this year.

Phoenix-Mesa Gateway is the airline's third-busiest airport based on destinations served, behind Las Vegas and Orlando.

The airline has flight crews and planes based in Mesa and a total of 159 employees here.

The airport, formerly Williams Air Force Base, is bursting from Allegiant's growth. It is on track to pass the 900,000-passenger mark this year, up from 579,059 last year.

Next week, it will unveil a $9.4 million terminal expansion that includes two new gates and an expanded baggage claim.

"It's been a very good market for us," Levy said.

Levy said Allegiant knew there was strong demand from tourists and snowbirds who winter here. What surprised the airline is the amount of bookings from local travelers like Loyd with roots in the smaller towns.

Allegiant does not advertise in Phoenix or other major cities it serves because it's expensive, and the airline's focus is on the travelers in smaller towns who have long filled its planes. On its Las Vegas routes, just 10 percent of Allegiant's passengers are from Las Vegas.

Out of Mesa, locals account for about a third of all passengers. In addition to transplants headed back home, the airline attracts vacationers and sports fans headed to watch Arizona State University or University of Arizona teams in places like Oregon.

Although Allegiant is slowing its growth because of higher fuel prices and a stalled economic recovery, it says it still has room to add destination cities from Mesa.

Low fares

Allegiant, which reported a $53 million profit for the first nine months of this year and is ranked No. 25 on Fortunemagazine's list of "100 fastest-growing companies,"has grown locally largely through word of mouth. Loyd already has alerted her friends to check the airline for flights to her wedding in May.

Meier Kalazan heard about Allegiant from a friend in Pasco, Wash. He flew the airline for the first time in October, driving to Mesa from Tucson to catch a flight to Eugene, Ore. He was meeting friends in Portland and heading to Mount Hood for snowboarding. His round-trip ticket, a birthday gift, was $115.

Allegiant touts its low fares. Its average one-way fare this year, excluding taxes and fees, is $74.66. That compares with $129.97 at Southwest and is not adjusted for flight length.

Allegiant's current one-way fares from Mesa range from the occasional $26.99 to $249 depending on destination, season and how far in advance travelers book.

"People largely care about price and very little else," Levy said. "The fact that we can offer them a price that gets them off the couch to travel is really, I think, the key."

The airline doesn't give away all its seats, of course, and can sometimes be the more expensive option.

Peggy Powers flew Allegiant from Mesa to Sioux Falls, S.D., in October for $39 one-way. Sioux Falls is about 90 minutes from her home in Okoboji, Iowa. But when she visits the Valley again after Christmas for the Fiesta Bowl and BCS Championship Game, she will fly from Omaha, Neb., to Phoenix on US Airways. The round-trip fare was $198 vs. at least $318 on Allegiant on dates that weren't ideal.

"Allegiant was way too expensive," Powers said.

Many fees

Allegiant passengers love to talk about two things: the low fares and the many fees. They compare notes at the airport and on the planes.

While waiting to go through security in Mesa in late September, Joe Farugia, a project manager from Phoenix, bragged about the $19.99 flights he scored to and from Rockford to visit his sister. "I would have been happy with $49.99 (each way)," he said.

Although thrilled at the low fare for his snowboarding trip, Kalazan was dinged $70 round-trip for bags when he got to the airport. The airline charges a flat $35 fee per bag each way at the airport, less if you pay when you buy your ticket.

"You have to pay everywhere now," he said.

Nothing on Allegiant is free. The airline collects an average $30.02 per passenger in fees. Fees are so prevalent, when the airline asked its Facebook fans to post photos from their travels, one commenter jokingly asked if there was a fee to submit one.

Allegiant started charging fees for a host of items long before its major-airline rivals, with some charges dating to 2003.

Major airlines started selling food about five years ago but did not really join the fee parade until oil prices spiked in 2008.

"Nothing's free because it's not free for us," Levy said.

Among other things, Allegiant charges a fee to:

- Book tickets online and over the phone. There is no fee to buy tickets at the airport.

- Get a seat assignment before the flight. For those who opt not to, they choose from the remaining seats when they arrive at the airport.

- Check bags.

- Board earlier than other passengers.

- Obtain drinks and food on board, including water. Bottled water is $2.

Mesa advertising agency owner Nancy Landl and her husband flew Allegiant for the first time this fall for an anniversary trip to Bend, Ore.

Landl laughed when she recounted her online-booking experience.

"It kept adding all this stuff on," she said.

In addition to $180 in airfare for two to Redmond, the couple paid $30 to book online, $80 to check bags, $56 for assigned seats and $32 for the option to change their itinerary.

Cutting costs

Allegiant can offer generally lower fares because it is a notorious penny-pincher. That starts with older planes, which cost $3.5 million including refurbishment vs. $40 million for a new plane. There are no traditional seat-back pockets (too expensive to clean) or reclining seats (prone to breakdowns).

The airline no longer has a toll-free reservations number. People who book by telephone have to make a long-distance call (and pay that fee). Workers at the airport do double duty, checking in the flight and then helping board passengers. Employees at the airline's nondescript headquarters in Las Vegas bring their own Kleenex. Levy brings his lunch from home.

Allegiant is also about to add 16 more seats to each plane, spreading costs over 166 seats instead of the current 150.